Titanium mining in doubt as workers sacked

Published by MAC on 2008-04-27

by Business Daily (Nairobi)

The future of titanium mining at the Coast looks gloomy following last week's sacking of about 20 employees by prospector Tiomin Kenya.

The workers were laid off due to lack of activity at the Kwale site, after the company delayed presenting reports to a Chinese investor to facilitate start of the project and to compensate farmers for their land.

The Canadian company has also recently cut links with a local advertising and public relations firm that handled marketing and publicity strategies.

"We are actually not operating now. Everything is down at the moment," a woman who answered the phone at the Kwale office said. Subsequent calls for details were either not answered or were disconnected.

Tiomin Kenya, a subsidiary of the Toronto listed Tiomin Resources Inc, has faced problems in Kenya since it was licensed 10 years ago to mine titanium in Kwale, Kilifi and Mambrui. The locals have refused to vacate the land where the mining is to take place claiming low compensation rates.

Cost overrun and low prices of titanium in the international market are also threatening to prematurely bring down the curtains on Kenya's first major mining expedition at the Coast.

The venture once promised to earn the country billions of shillings in foreign exchange and create jobs for hundreds of people. Four hundred Kenyans were to be employed once the project starts and residents were to earn millions of shilling in land compensation.

Titanium is a silvery-grey metallic element which is added to various steel alloys and used in the manufacture of jet engines and missiles because of its heat and corrosion-resistance.

It is estimated that the Kenyan Coast holds about 3.2 billion tonnes of titanium deposits - 14 per cent of the world's titanium resources.

Last year, Jinchuan Group Ltd of China agreed to finance and expedite the development of the Kwale mineral sands project.

Jinchuan said it will invest approximately Sh647 million in Tiomin by purchasing 72,521,134 common shares of the Company.

Tiomin Resources, said last year it suffered a Sh2.7 billion ($40 million) increase in project maintenance cost because of delay in the start of the project.

The cost overshoot was inclusive of Sh300 million paid out to some four major contractors as contract closure fees.

Tiomin ended contracts with all engineers and local mining experts it had engaged because the Kwale mining project was taking too long to commence following a chain of litigations lodged by farmers protesting at what they said was poor compensation for their land.

Tiomin Resources, suspended its mining operations in Kwale for seven months in February last year following a failure to raise funds to kick start the mining project.

The firm said disagreements on land issues and access to the mining site had spawned delays, causing costs to rise, forcing the project's lenders to withdraw the debt facility that was in place.

Lenders withdrew a Sh10.7 billion debt facility last year that was aimed at facilitating the Kwale mining project. But the firm in most circumstances has allayed the fears of imminent collapse of the Kwale project saying that talks with some potential lenders that could advance them the loan were on-going.

Tiomin had set aside $5.7 million to compensate Kwale farmers whose land was taken away for the benefit of the project. So far $4.3million has been paid to some farmers.

The firm had started redesigning a new mining model reviewing the total project cost, environmental impact and the amount of titanium expected from Kwale.